Mayor wants $40M tax cut

Honolulu Mayor Mufi Hannemann has proposed a one-time cut of $40 million in property taxes for homeowners by August 2006 to address concerns about the sharp increase in property values this year.

Under the proposal, Oahu's 135,000 homeowners will receive a portion of the $40 million after they pay their property taxes in August.

HELP FOR HOMEOWNERS

Honolulu Mayor Mufi Hannemann made three proposals yesterday to tackle the issue of soaring property taxes for homeowners:
» A one-time $40 million tax cut for homeowners next year.
» A new classification that will lower the property tax rate for owner-occupants in the future.
» A new mayor's tax policy committee made up of business leaders, private-sector economists and tax experts that will work with the City Council on tax policy.

Hannemann said he had not made any specific plans on how the city could refund the money, but it could be based on a homeowner's age, income and how long he or she had lived at the house.

He said he would work with City Council leaders on specifics when he sends them his budget in two months.

Instead of investing $50 million in the city's "rainy day" fund, Hannemann scaled back his goal to $20 million in order to give homeowners a tax break next year.

"It is still my goal and commitment to work toward that goal (of $50 million), but I'm very cognizant and sensitive to the fact that a majority of our residents want relief now," the mayor said at a press conference yesterday.

Since the tax break would be a one-time deal, Hannemann also proposed a long-term solution, creating a homeowner-occupant classification for Honolulu that would have a lower property tax rate than investors.

Some City Council members urged Hannemann to lower the property tax rates to offset property values that increased by an average of 26 percent. Some homeowners have said their taxes nearly doubled.

City Councilwoman Ann Kobayashi welcomed the tax cut and planned to ensure it would help the middle class and those on fixed incomes. She and City Council Chairman Donovan Dela Cruz introduced a bill of their own that would cap future property tax increases for those who earn less than $75,000 a year or live in their homes for 10 years.

"We're trying to do something more permanent," Kobayashi said.

Dela Cruz said he is interested in working with Hannemann to ensure that they develop a plan to minimize the impact on homeowners.

"I think it's obvious we all agree that we need some kind of tax relief," Dela Cruz said. "We're still not quite sure how it's going to help and who it's going to help."

Last year, homeowner Robert Babis had to pay $1,865 in property taxes for his home on the North Shore. With the property value increases this year, he will have to pay $3,491 -- a jump of 87 percent. He said he'd rather see an increase in the homeowner's exemption of $40,000 and lower tax rates than a one-time tax cut.

"The city budget should not be growing to the proportion of property tax," Babis said. "I'm going to pay $300 a month. It's like we're paying rent to the city here."

City Councilman Charles Djou also said he would like to see a long-term solution, either by increasing the homeowner exemption to $100,000 or lowering the tax rate.

"A one-time thing is good, but not good enough," Djou said. "It's a difference between first down and a touchdown. What the mayor is suggesting is a first down. I would hope the mayor would be more aggressive."

Hannemann maintains that he will not lower the property tax rate, the single largest source of income to the city. Keeping the tax rate unchanged will help improve the city's bond rating, giving it greater power to borrow, at lower interest rates.

Hannemann also will create a mayor's Tax Policy Committee, to consist of private-sector economists, tax experts and business leaders who will work with the City Council.